How Have Discussions with Fund Managers Evolved Over the Last 10 Years?

By Tom Cole, Managing Director – UK & Europe at Abacus Group

As a panellist at the annual Bloomberg Hedge Fund Start-up conference discussing ‘The increasing importance of IT infrastructure,’ I was asked: “How have your discussions with fund managers evolved over the last 10 years?”

This was a particularly poignant question for me, because 10 years ago, I was working at a hedge fund. I joined Abacus five years ago to set up our UK and European region, building on their success in the US. Shifting from a client to a service provider has been a fascinating experience. Here are some of my observations over the past decade:

Technically Savvy. Technology is being embraced more within both personal and professional lives. Society has become more technologically astute and hungry. This evolution rolls into business discussions. Conversations are less focused on the technological mechanics and more on how to realise tangible business value.

Hunger and Acceptance to Outsource. Like many other services consumed by fund managers, outsourced technology support is proven to yield many benefits. Partnering with credible service providers is encouraged, and outsourced IT is now the de facto. Rollback 8 – 10 years, many funds were procuring servers and deploying capacity just in case. Take a look at my piece on ‘Why do I need an IT Integrator?’

Which Cloud? Cloud computing is a new paradigm, and it has dominated technology discussions over the past decade. I’m pleased to say in recent times, cloud computing is no longer a debate. As technology has evolved, trust and adoption with Public cloud deployments have proven it is fit for purpose and yields various technological and business benefits.

Cyber Security. In 2010, signature-based anti-virus and rules-based firewalls were considered sound security controls. Penetration testing was nice to have, but this is no longer the case. Nice to haves are now absolute must-haves. Cybersecurity is no longer perceived as a toothless risk. The risk is real to all businesses. If you are connected to the internet, you are vulnerable. Both regulators and investors recognise the threat and are demanding firms remain in touch with best practice.

Agility. Fund managers demand both technical and commercial agility. Subscription-based services have met this goal, and fund managers are paying for what they consume, scaling to their immediate needs. With technology becoming more commoditized, it is harder to manufacture technical lock-in than avoid it. Currently living through a global pandemic, agility has been imperative for firms to remain operational and focus on core business disciplines.

ODD sophistication. As per the first point, society and the industry are becoming more technologically aware. Operational due diligence over the past decade is proportionately following this trend. Box ticking is no longer adequate, the ‘trust but verify’ mantra is put to work daily. Technological configuration is questioned, with a growing desire for third party governance or verification. For example, some regulators insist on providing proof of cyber awareness training only via vendor certificates.

Startup Offices. Committing to your own office space within the hedge fund fashionable postcodes was an accepted part of launching. Serviced offices had a stigma attached, and generally, the resilience (e.g. connectivity) was subpar. Nowadays, serviced offices are very popular in the startup community, decreasing time to market and simplifying ongoing office management with maximum flexibility. It will be interesting to see how Covid-19 will impact firms’ workplace strategy for the medium to long term.

You can watch the Bloomberg Hedge Fund Startup conference on-demand here.